The commercial real estate housing market in Canada is booming. With increased businesses comes an increase in the demand for office and retail space. Additionally, with the rise of e-commerce, there is also a need for warehouses and distribution centres.
According to the latest statistics, the average annual rental rate for office space in Canada is $32 per square foot. For retail space, the average rental rate is $32 per square foot. While for industrial space, the average rental rate is $8.50 per square foot. The demand for commercial real estate is expected to continue to grow in the coming years. If you are thinking of investing in the commercial real estate market, now is a good time to do so.
Commercial Real Estate Market
Commercial real estate (CRE) is land which is solely used for business purposes. This can include office buildings, retail space, warehouses, and manufacturing plants. The CRE market in Canada is essential for businesses of all sizes as it provides the necessary space for them to operate.
The CRE market in Canada has seen strong growth in recent years. The capitalisation rates of the CBD rose by 13 percentage points to 5.6%, while the capitalisation rates of the suburbs stayed constant at 6.9%. This growth is expected to continue, with the market reaching a value of $1 trillion by 2025.
The importance of the commercial real estate market cannot be understated. It plays a vital role in the Canadian economy and provides businesses with the space they need to grow and thrive. Several factors are driving this growth, including an increase in foreign investment. The CRE market also benefits from low-interest rates and a growing economy.
To make an informed decision about investing in commercial real estate, it is important to understand the market. Here are some key statistics about the commercial real estate market in Canada:
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- The average price of a commercial property in Canada is $1.5 million.
- The vacancy rate for office space in Canada is 16.3%.
- Average Downtown Toronto commercial rental rates in 2022 were $41.9 /sq ft.
- According to Statistics Canada’s Job Vacancy and Wage Survey, job opportunities rose by 4.7% between the first and second quarters of 2022.
- The highest average seeking net rates were recorded for industrial space in Victoria and Vancouver, which came in at $16.47 and $16.31 per sqft, respectively.
Lease Stats of The Commercial Housing Market
Canada’s commercial real estate housing market has seen strong growth in recent years. The following are some key commercial lease stats in Canada:
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- After an equal rise (+0.8%) in the previous quarter, corporate rents climbed 0.8% in the last quarter of 2021.
- IT businesses have increased the percentage of office space leased in Canada by 60% from the initial quarter of 2020 to the third quarter.
- By 2027, the Canadian commercial properties market is projected to expand at a compound annual growth rate of 11%. Onni Group and Westbank Corporation are two of the most important businesses.
- There will be an estimated yearly growth of 3.8% in the capacity of the Canadian Industrial Equipment Rental and Leasing market from 2017 to 2022.
- With a rolling average term of the lease of about 14.2 years, this includes the units in Canada for the financial years 2015 and 2014, as well as for the five quarters of 2015 and 2014.
- The CRSPI tracks the annual percentage growth in rental prices for retail property throughout Canada.
Sale Stats of The Commercial Housing Market
The commercial real estate housing market in Canada is booming. As per the Canadian Real Estate Association, February had the maximum average house price in Canadian history, reaching $816,720. The average prices of commercial sale stats in Canada have also gone up by 7.4%.
Several factors are driving this robust growth in the commercial sale stats in Canada’s real estate market. These include :
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- The Canadian economy is doing well and businesses are expanding. This is resulting in an increased demand for office and retail space.
- Interest rates remain low, making it an attractive time to invest in property.
- There is a strong potential for foreign investment in Canadian real estate, especially from Chinese buyers.
With all of these factors working in its favour, it is no wonder that the commercial real estate market is booming and will continue to grow. If you are thinking of buying or selling a commercial property, now is a great time to do it!
The Final Word
The commercial real estate market in Canada has been strong in recent years. The vacancy rate has been declining and rental rates have been rising. The above-mentioned commercial lease stats in Canada are an indicator that it is a good time to invest in real estate market. However, there are some risks to investing in commercial real estate as well. There is a possibility of the market changing suddenly and interest rates could rise making it difficult to finance a purchase.
Overall, the commercial real estate market in Canada is a good place to invest. With rising rental and falling vacancy rates, there is potential for good returns on investment.
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Frequently Asked Question (FAQs)
In 2019, Canada's commercial real estate market was worth $2.2 trillion. This is a significant increase from the $1.18 trillion value in 2018. The market is expected to continue to grow in 2023 and beyond.
As the population of Canada continues to grow, so will the demand for commercial real estate. The Canadian commercial real estate industry is estimated to grow at an 8% CAGR during the forecast period (2022-2027). We can expect more office buildings, retail space, and warehouses built in the coming years.
Commercial real estate has outperformed other asset classes in recent years and is expected to continue in the coming years. The current market conditions favour buyers with low-interest rates and a large selection of properties available. Investing in commercial real estate can provide several benefits, including potential rental income, tax advantages, and appreciation.
In 2023, commercial real estate property in Canada will see strong sales, with a predicted sale of $59 billion. While the market could see gains for the rest of 2023, several factors could dampen or reverse the positive momentum depending on numerous factors, such as recession and immigration.
The most profitable type of commercial real estate includes office buildings and retail space, and apartment buildings. Industrial properties can be quite profitable, but they often require a lot of upfront investment. While apartment buildings offers a steady stream of rental income. However, they can also be risky as the demand for apartments fluctuates greatly depending on economic conditions.
Commercial properties are not meant to be utilized as residences because they are intended for commercial operations. However, living in a business facility is possible depending on several variables, including location and local zoning regulations.
The most occupied properties are often the ones that have the largest potential returns on investments. These commercial real estate assets may include multifamily developments, student dorms, offices, self-storage facilities, and mixed-use buildings. For instance, self-storage is a great business property investment since it does well in prosperous and grave economic times.
Any property used for commercial purposes is called commercial real estate in Canada. It comprises office space, small shops, outlets, industrial units, supermarkets, stores in outlet malls, dining establishments, and more.
The Blackstone Group is the largest commercial real estate owner, founded 40 years ago in the United States. As of April 23, 2023, their net worth is $61.55 billion, and they have a portfolio with over 150 million square feet of office space.
The down payment for commercial property is higher than for residential property in Canada. An average down payment on a mixed-use property runs between 20 to 35%, while commercial properties tend to have a higher ratio, approximately 50%.
Commercial properties that give back a higher return on investment are profitable units. Self-storage is an excellent commercial property investment since it does well in prosperous and grave economic times.
Property used specifically for business-related purposes, such as food, shopping, offices, and more, is considered commercial property in Ontario. How big is the commercial real estate market in Canada?
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